Question 1

If disposable income falls by $50 billion and consumption falls by $40 billion,then the slope of the consumption function is

Accepted Answer

A) 1.20. 
B) 0.80. 
C) 0.70. 
D) 0.10. 
A) 1.20. 
B) 0.80. 
C) 0.70. 
D) 0.10.

Question 2

Table 23-4
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Consumption } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Disposable Income } \
\text { (dollars) }
\end{array} \
\hline \$ 600 & \$ 1,000 \
\hline 900 & 1,500 \
\hline 1,200 & 2,000 \
\hline
\end{array}$$
-Refer to Table 23-4.Given the consumption schedule in the table above,the marginal propensity to consume is

Accepted Answer

A) 0.5. 
B) 0.6. 
C) 0.75. 
D) 0.8. 
A) 0.5. 
B) 0.6. 
C) 0.75. 
D) 0.8.

Question 3

An unplanned decrease in inventories results in

Accepted Answer

A) a decrease in planned investment. 
B) an increase in planned investment. 
C) actual investment that is greater than planned investment. 
D) actual investment that is less than planned investment. 
A) a decrease in planned investment. 
B) an increase in planned investment. 
C) actual investment that is greater than planned investment. 
D) actual investment that is less than planned investment.

Question 4

If consumption is defined as C = 2,400 + 0.9Y,then the marginal propensity to consume is 0.9.

Accepted Answer

A) True 
 B)False

Question 5

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

Accepted Answer

A) True 
 B)False

Question 6

When aggregate expenditure is less than GDP,which of the following is true?

Accepted Answer

A) There was an unplanned increase in inventories. 
B) Firms spent more on capital goods than they anticipated. 
C) Households bought more new homes than they anticipated. 
D) All of the above must be true when aggregate expenditure is less than GDP. 
A) There was an unplanned increase in inventories. 
B) Firms spent more on capital goods than they anticipated. 
C) Households bought more new homes than they anticipated. 
D) All of the above must be true when aggregate expenditure is less than GDP.

Question 7

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Accepted Answer

As GDP increases in the United States du

Question 8

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

Accepted Answer

A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million. 
A) There was an unplanned increase in inventories equal to $2 million. 
B) There was no unplanned change in inventories. 
C) There was an unplanned decrease in inventories equal to $2 million. 
D) There was an unplanned decrease in inventories equal to $19 million.

Question 9

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending

Accepted Answer

A) this may benefit the economy in the short run,but not in the long run. 
B) the economy will benefit in the short run and benefit by an even greater amount in the long run. 
C) this will have a major negative impact on the economy in both the short run and in the long run. 
D) this may benefit the economy in the long run,but could be counterproductive in the short run. 
A) this may benefit the economy in the short run,but not in the long run. 
B) the economy will benefit in the short run and benefit by an even greater amount in the long run. 
C) this will have a major negative impact on the economy in both the short run and in the long run. 
D) this may benefit the economy in the long run,but could be counterproductive in the short run.

Question 10

Into which category of aggregate expenditure would each of the following transactions fall?
a.Sandra MacMillian purchases a new Ford Focus.
b.The city of Richardson buys 5 new garbage trucks.
c.Adrian Garcia buys a newly constructed townhome.
d.A consumer in Latvia orders an iPhone from Apple.
e.Ford Motor Company buys 300 new iPhones from Apple.

Accepted Answer

a.Consumption
b.Gove

Question 11

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Accepted Answer

Firms will decrease

Question 12

Figure 23-1  
-Refer to Figure 23-1.If the economy is at point J,what will happen?

Accepted Answer

A) Inventories have fallen below their desired level,and firms decrease production. 
B) Inventories have fallen below their desired level,and firms increase production. 
C) Inventories have risen above their desired level,and firms decrease production. 
D) Inventories have risen above their desired level,and firms increase production. 
A) Inventories have fallen below their desired level,and firms decrease production. 
B) Inventories have fallen below their desired level,and firms increase production. 
C) Inventories have risen above their desired level,and firms decrease production. 
D) Inventories have risen above their desired level,and firms increase production.

Question 13

Table 23-12
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Real GDP } & \text { Consumption } & \begin{array} { c } 
\text { Planned } \
\text { Investment }
\end{array} & \begin{array} { c } 
\text { Government } \
\text { Purchases }
\end{array} & \text { Net Exports } \
\hline \$ 4,000 & \$ 3,500 & \$ 350 & \$ 450 & - \$ 100 \
\hline 5,000 & 4,300 & 350 & 450 & - 100 \
\hline 6,000 & 5,100 & 350 & 450 & - 100 \
\hline 7,000 & 5,900 & 350 & 450 & - 100 \
\hline
\end{array}$$
-Refer to Table 23-12.Using the table above,answer the following questions.The numbers in the table are in billions of dollars.
a.What is the equilibrium level of real GDP?
b.What is the MPC?
c.If potential GDP is $7,000 billion,is the economy at full employment? If not,what is the condition of the economy?
d.If the economy is not at full employment,by how much should government spending increase so that the economy can move to the full employment level of GDP?

Accepted Answer

a.Equilibrium real GDP is determined whe

Question 14

C = 2,550 + (MPC)Y
I = 800
G = 1,100
NX = 50
If the equilibrium level of GDP is $11,250,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

Accepted Answer

Y = C + I + G + NX.
11,250 = 2

Question 15

If the marginal propensity to save is 0.4,the multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 16

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

Accepted Answer

A) $4,950 
B) $5,500 
C) $6,050 
D) $6,111 
A) $4,950 
B) $5,500 
C) $6,050 
D) $6,111

Question 17

What impact does a higher price level have on interest rates,wealth,and investment spending?

Accepted Answer

A higher price level reduces t

Question 18

The multiplier is calculated as the change in ________ divided by the change in ________.

Accepted Answer

A) real GDP;autonomous expenditure 
B) autonomous expenditure;real GDP 
C) nominal GDP;autonomous expenditure 
D) real GDP;induced spending 
A) real GDP;autonomous expenditure 
B) autonomous expenditure;real GDP 
C) nominal GDP;autonomous expenditure 
D) real GDP;induced spending

Question 19

Figure 23-1  
-Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure less than GDP?

Accepted Answer

A) J 
B) K 
C) L 
D) none of the above 
A) J 
B) K 
C) L 
D) none of the above

Question 20

When aggregate expenditure = GDP

Accepted Answer

A) macroeconomic equilibrium occurs. 
B) the federal budget is balanced. 
C) net exports equal zero. 
D) saving equals zero. 
A) macroeconomic equilibrium occurs. 
B) the federal budget is balanced. 
C) net exports equal zero. 
D) saving equals zero.

Exam 23: Aggregate Expenditure and Output in the Short Run

If disposable income falls by $50 billion and consumption falls by $40 billion,then the slope of the consumption function is

Table 23-4 Consumption (dollars) Disposable Income (dollars) \ 600 \ 1,000 900 1,500 1,200 2,000 -Refer to Table 23-4.Given the consumption schedule in the table above,the marginal propensity to consume is

An unplanned decrease in inventories results in

If consumption is defined as C = 2,400 + 0.9Y,then the marginal propensity to consume is 0.9.

If consumption is defined as C = 1,350 + 0.6Y,then the marginal propensity to consume is 0.6.

When aggregate expenditure is less than GDP,which of the following is true?

Ceteris paribus,how does an expansion in the United States affect U.S.net exports?

Consumption is $5 million,planned investment spending is $8 million,government purchases are $10 million,and net exports are equal to $2 million.If GDP during that same time period is equal to $27 million,what unplanned changes in inventories occurred?

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Figure 23-1 -Refer to Figure 23-1.If the economy is at point J,what will happen?

C = 2,550 + (MPC)Y I = 800 G = 1,100 NX = 50 If the equilibrium level of GDP is $11,250,using the equations for C,I,G,and NX shown above,find the value of the marginal propensity to consume.

If the marginal propensity to save is 0.4,the multiplier is 2.5.

If the consumption function is defined as C = 5,500 + 0.9Y,what is the autonomous level of consumption expenditure?

What impact does a higher price level have on interest rates,wealth,and investment spending?

The multiplier is calculated as the change in ________ divided by the change in ________.

Figure 23-1 -Refer to Figure 23-1.According to the figure above,at what point is aggregate expenditure less than GDP?

When aggregate expenditure = GDP

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The multiplier is calculated as the change in divided by the change in .